BATS Exchange

Changes to Price Adjust Functionality Approved

On October 15th, the SEC approved BATS Exchange’s and BATS-Y Exchange’s separately proposed amendments to their respective rules to add Price Adjust functionality to each of their equities and options trading platforms.

Financial Industry Regulatory Authority

SEC Approves Amendments Expanding Arbitrators’ Authority to Make Referrals During an Arbitration Proceeding

On October 17th, the Financial Industry Regulatory Authority (“FINRA”) advised that the SEC has approved amendments to the Customer and Industry Codes to permit arbitrators to make a referral, during an arbitration, of any matter or conduct that has come to the arbitrator’s attention during a hearing, which the arbitrator has reason to believe poses a serious threat, whether ongoing or imminent, that is likely to harm investors unless immediate action is taken. The amendments are effective October 27, 2014. FINRA Regulatory Notice 14-42.

Sanctioning Abuse

On October 17th, Reuters discussed FINRA arbitration procedures and claims that FINRA arbitrators have a permissive attitude toward discovery abuses. Sanctioning Abuse.

FINRA’s Amendments Relating to Per Share Estimated Valuations for Unlisted DPP and REIT Securities Are Approved

On October 10th, the SEC approved FINRA’s proposed amendments to its rules that address per share estimated valuations for unlisted direct participation program (“DPP”) and real estate investment trust (“REIT”) securities. The amendments require general securities members to include in customer account statements a per share estimated value for an unlisted DPP or REIT security, developed in a manner reasonably designed to ensure that the per share estimated value is reliable, as well as to make related disclosures. The amendments include two methodologies for calculating the per share estimated value for a DPP or REIT security that would be deemed to have been developed in a manner reasonably designed to ensure that it is reliable: (1) the net investment methodology; and (2) the appraised value methodology. SEC Release No. 34-73339.


ICE Clear Credit

ICC’s Use of House Initial Margin as an Internal Liquidity Resource

On October 14th, the SEC provided notice of ICE Clear Credit’s filing of a proposed amendment to ICC Clearing Rule 402(j) to further clarify ICC’s intention to return any Clearing Participant’s House Initial Margin used as an internal liquidity resource. Under Rule 402(j), ICC may, in connection with a Clearing Participant default, (i) exchange House Initial Margin held in the form of cash for securities of equivalent value and/or (ii) exchange House Initial Margin held in the form of cash in one currency for cash of equivalent value in a different currency. ICC proposes adding language to clarify that ICC will engage in liquidity exchanges pursuant to Rule 402(j) on a temporary basis. Further, ICC proposes amending Rule 402(j) to state that ICC will reverse any such exchange involving a Clearing Participant’s Initial Margin in its House Account as soon as practicable following the conclusion of the event requiring the exchange of a Clearing Participant’s Initial Margin for liquidity purposes (i.e., as quickly as possible following the conclusion of the liquidity event). Comments should be submitted within 21 days after publication in the Federal Register, which is expected during the week of October 20. SEC Release No. 34-73347.


International Swaps and Derivatives Association

Resolution Stay Protocol for Derivatives Adopted

On October 11th, 18 major global banks agreed to a new Resolution Stay Protocol, announced the International Swaps and Derivatives Association (the “ISDA”). The new ISDA Protocol imposes a stay on cross-default and early termination rights within standard ISDA derivatives contracts between these firms if one of them is subject to resolution action. ISDA Press Release.


Municipal Securities Rulemaking Board

Changes to Professional Qualification Requirements Are Approved

On October 15th, the SEC approved the Municipal Securities Rulemaking Board’s proposed amendments to Rule G-3, on professional continuing education requirements, to require brokers, dealers and municipal securities dealers to conduct annual municipal securities training for registered representatives who regularly engage in, and municipal securities principals who regularly supervise, municipal securities activities. In addition to such annual securities training, the amendments expand the definition of covered registered persons who are required to participate in such training to include registered persons who engage in a variety of municipal securities activities, regardless of whether such activities are customer-facing. SEC Release No. 34-73368.


NYSE

Changes to Quote Mitigation Plan Proposed

On October 15th, the SEC provided notice of NYSE Arca’s and NYSE MKT’s individually filed proposals to modify their respective quote mitigation plans. Comments should be submitted within 21 days after publication in the Federal Register, which is expected during the week of October 20.

Proposed Amendments to “Add Liquidity Only” Modifier Approved

On October 9th, the SEC approved the New York Stock Exchange’s and NYSE MKT’s proposed amendment of their respective exchange rules to allow an Add Liquidity Only (“ALO”) modifier for day limit orders and to allow the day time-in-force condition and ALO modifier for Intermarket Sweep Orders. SEC Release No. 34-73333.